Save Article

HCA Talks Show Stronger Clout
Of Private-Equity Funds

Hospital operator HCA is in advanced talks to sell itself to an investor group, and all eyes are turning to one clear trend: the growing influence of private-equity funds.

The proposed deal, valued at $21 billion plus $10.6 billion in HCA's debt, would involve three private-equity groups &ndash; Bain Capital; Kohlberg, Kravis Roberts; and Merrill Lynch &ndash; as well as HCA's management and the founding family, the Frists. The buyout "would be the strongest sign yet of the power and ambition of private-equity funds, which are sitting on a record cash pile and looking for ever-larger acquisition targets," The Wall Street Journal says, adding that the funds' influence "already penetrates deep into the economy, from space satellites and General Motors car leases, to TV stations and retailers like Neiman Marcus and Toys "R" Us." The private-equity business, "swimming in cash," is eager for companies like HCA, which generates significant revenue but is perceived as being undervalued by investors, the New York Times adds.

The potential deal could become the largest leveraged buyout in history, and would beat the record-setting leveraged buyout of RJR Nabisco in 1989. The transaction would also follow several other huge acquisitions by private-equity funds that hold billions of dollars of cash. In June, a group of investors acquired Univision for $12.3 billion; in May, a group bid $22 billion for Kinder Morgan; and in April, a group agreed to buy GM's GMAC unit for up to $14 billion, the Times points out. These deals are being fueled by low interest rates, liberal debt markets and record amounts of investor money moving away from equities and into buyout funds, Reuters notes. In the first half of 2006, buyout firms accounted for 19% of all mergers and acquisitions, up 64% from the prior year, Reuters adds, citing Dealogic. And there had been speculation in the industry that this year would be the right one for the RJR Nabisco record to be broken, the Financial Times says, adding that a buyout of HCA may be the first in a series of private-equity deals in excess of $30 billion.

Meanwhile, Israeli forces pressed further into Lebanon, targeting a stronghold of the Hezbollah guerrilla group. Israeli troops took control of a hilltop in the Lebanese town of Bint Jbail after a heavy artillery barrage, but the army hadn't taken the town itself, military officials told the AP. Israeli casualties were seen being carried back into Israel on stretchers. Israeli media said warplane attacks had led to some Hezbollah casualties. As the fighting continued, diplomatic efforts increased in Israel with growing discussion of a multinational armed force being placed in the border area between it and Lebanon, the New York Times says.

Financial Times: A last-minute effort to impose greater restrictions on European Union funded stem-cell research was under way ahead of a vote on whether to continue funding for the controversial experiments. Critics were trying to reassemble support for further limits on EU-backed experiments on human embryonic stem cells, just days after President Bush vetoed measures to increase U.S. spending on such work.

New York Times: The U.S.'s Department of Homeland Security is revamping several of its core disaster-relief programs, enacting changes that will include sharply cutting emergency cash assistance for victims of major disasters, and more carefully controlling access to free hotel rooms.